4. Should procurement costs be considered a linear function of the number of orders?Sturdivant Sound Systems manufactures and sells stereo and CD sound systems in both console and component styles. All parts of the sound systems, with the exception of speakers, are produced in the Rochester, New York, plant. Speakers used in the assembly of Sturdivant’s systems are purchased from Morris Electronics of Concord, New Hampshire.

Jason Pierce, purchasing agent for Sturdivant Sound Systems, submits a purchase requisition for the speakers once every four weeks. The company’s annual requirements total 5,000 units (20 per working day), and the cost per unit is $60.

(Sturdivant does not purchase in greater quantities because Morris Electronics, the supplier, does not offer quantity discounts.)

Rarely does a shortage of speakers occur because Morris promises delivery within 1 week following receipt of a purchase requisition. (Total time between date of order and date of receipt is 10 days.)